Listen in as Aviation Week Network's Karen Walker speaks with Carsten Spohr, the head of multiple European airlines, about North American route expansion, ITA, returning the Airbus A380 to service and supply chain problems.
Don't miss a single episode. Subscribe to Aviation Week's Window Seat Podcast in Apple Podcasts and Spotify.
Rush Transcript
Karen Walker:
Hello, everyone and welcome to Window Seat, the Aviation Week Network Air Transport podcast. I'm ATW and Group Editor-in-Chief Karen Walker and it's great to have you on board. And this week I'm absolutely delighted to be joined by a very special guest indeed, the CEO at Lufthansa Group, Carsten Spohr. Carsten, welcome and thank you so much for joining us while you're here in DC. Carsten of course, is one of the industry's most respected leaders. He has been CEO at Lufthansa Group since 2014, a company that includes Lufthansa, Swiss, Austrian Airlines, Brussels Airlines, Eurowings and other regional carriers. His long career with Lufthansa includes obtaining a commercial pilot's license at the company's flight training school and he holds a captain's license for the Airbus A320 family aircraft and he also serves on the IATA Board of Governors. So Carsten, let me start by asking you first of all how this summer's operations have gone in general across the group.
Carsten Spohr:
Yeah, this summer has been spectacular in terms of demand in almost all parts of our global network. We have not seen only recovery towards pre-pandemic levels, but in some parts we are already exceeding that. But of course that what we call joy has been somewhat dampened by the huge issues on the supply side, which is hardware, airplanes , engines, but its people also and its infrastructure on the ground and in the air. So that surely also did not allow us to give that level of service around the clock, which we would like to have given as an industry, I think I can speak on behalf of many other airlines as well. But let's go back to the core of your question. Demand, the wish to travel, the wish to connect to people, cultures and economy as we call our purpose has been felt so strong. It was a real joy I think for all of us in the industry.
Karen Walker:
Absolutely. So very good news there. As you say, some challenges that we can talk about a little bit in a moment. But you've just made news actually, Lufthansa Group, today with some announcements about new destinations, new frequencies, additional frequencies in the US and Canada market. Can you tell us a little bit about those?
Carsten Spohr:
Indeed. The North Atlantic has been a key element of our commercial success in '23 and of course also in the years before, but that caused us to decide together with our partner, United, to significantly expand our network next summer towards the US. We're actually adding two new destinations, Minneapolis, St. Paul and [inaudible 00:02:38] Durham, which we have not served before. We're also adding additional routes. We are the first time ever go from Zurich to Washington DC. We're also adding Munich, Seattle to our network and we'll bring the 380 not only back to JFK, Boston and Los Angeles, we're also going to bring it back here to the capital in the summer of '24 due to the strong demand and we'll connect Munich with A380 to Washington. So indeed, it shows that we are not only scaling up in general, but we have a special focus on the North Atlantic on our partnership with United and the demand, especially from the US but also from the European side, I think will prove us right.
Karen Walker:
As someone who lives in Washington DC, I'm very glad to see the A380 coming back. That's a great plane.
Carsten Spohr:
And you're also now living in one of only two gateways which we are connecting to all of our five hubs in Europe. It's only New York City and Washington DC which are connected to all of our five hubs. And maybe hopefully six, once ITA is part of the family, we'll take it from there.
Karen Walker:
I believe you now plan to bring back in service all A380s that you have, is that correct?
Carsten Spohr:
Yeah. I think we decided to do so because the demand is so strong that we will not cope with the unfortunate delays of deliveries of aircraft. Also, the positive response to the 380 being brought back was also surprising the most optimistic people in Lufthansa. So we now not only decided to bring all the eight we still own back, we also decided to invest into the onboard product, a new business class onboard as quickly as we can manage. And that shows that we will probably operate that aircraft for quite some time to make sure that the strong demand can be met.
Karen Walker:
It's funny how things have changed really, isn't it? It's not that long ago that people were saying the A80 would never come back and now we're seeing the value of that plane again.
Carsten Spohr:
I keep telling people inside and outside the industry, my favorite line is never boring in aviation. But it's wonderful to adapt decisions in that direction rather than to correct yourself when you were too optimistic and then you have to take a more negative decision. So this one is fun for all of us. The crews look forward to the airplanes, so do the passengers. And with the current loads and yields, even my controllers are happy with the 380.
Karen Walker:
Let's talk a little bit about those supply chain issues. You've raised that, it's an ongoing situation, we know about the Pratt & Whitney GTF engine, but it's a broader situation than just that. Tell us a little bit about your views on that and where Lufthansa, how that's affecting the Lufthansa Group.
Carsten Spohr:
Yeah. I think we're seeing a mix of still issues in ramping up supply chains from pandemic times, which probably none of us really forecasted in the right way how to get out of that. Also listening to the CEOs of Airbus and Boeing, I think that's something they share. This is much more complicated than we thought. Then there's regulatory issues. Think about the certification of the 777X, has nothing to do with the pandemic but comes on top. Then unfortunate coincidences like the production issues Pratt & Whitney had with the geared turbofan, which also have nothing to do with the pandemic. But you add all that up and you see a supply chain situation which I don't remember in the 30 years I've been around.
And this will last years to straighten it out, I think, which will probably, assuming the demand stays strong, will be a situation for airlines where very strong demand continues to meet restricted supply. And we have to make our choices of where to fly, which new routes to open, which maybe routes we would like to operate, we cannot operate yet. So these are impacts which also we at Lufthansa are dealing with daily. We even thinking about 20 aircraft to be on the ground next summer from the 320neo fleet, which will compensate with wet leases and extending operation of older aircraft. But this is a significant impact and just the Pratt & Whitney issue basically means that half of the fleet, of the neo fleet, powered by Pratt & Whitney will be on the ground any given day next year. So that's significant for the whole industry around the world.
Karen Walker:
Absolutely. It's sort of sad, isn't it, when everybody loves seeing this demand come back and then there's the constraints that are coming from the industry.
Carsten Spohr:
No, indeed. But let's also be honest, this industry before COVID, sometimes in low yields and almost lack of respect, what it does suffered an image crisis, which I'm, to be honest, somewhat happy that has also swung around completely. The respect for the industry, the interest to travel, the willingness to spend money on travelling, on aircraft in premium classes, all that combined. I think it's a nice tailwind for an industry which is always challenging and also now as I mentioned has challenges. But I think for all of us working in this industry, for all of us working with this industry, I think this is some of the better time because the respect on the gloriousness of flying I think is pretty high right now.
Karen Walker:
You have mentioned a few times about the continued interest and growing interest in premium travel, not just at the corporate level, but people are willing to pay more for a nicer service for their leisure and personal travel. You're still seeing that across the Lufthansa Group airlines?
Carsten Spohr:
Yeah, fortunately we do and from also almost all parts of the network also quite strong here from the US. There's many reasons for this potentially, but I think looking outside of our industry is always a little helpful. I mean, look at the strong demand for luxury cars in the last 20, 30 years almost, luxury watches, luxury clothes, other luxury goods around the world. There has been enough purchasing power globally for those products. There has been an interest to use available financial means to treat yourself, be it with a nice car, be it with the experience of flying first class and business class. So I think in the end, one of the global mega consumer trends has now also arrived in aviation. That's also why I believe this is there to stay for some time.
Karen Walker:
And that's interesting because of course many of those luxury brands in cars and watches, et cetera, German and Swiss. So presumably, you can benefit from that, yes?
Carsten Spohr:
It's probably not the worst when it comes to premium to have at least two premium airlines based in Switzerland and Germany. And of course, the brands speak for themselves, but also our other brands working on taking advantage of this willingness to pay and providing better services, people are willing to add a little bit to their budget for.
Karen Walker:
You mentioned ITA, you're taking a stake in the Italian flagship. Can you just give us a very quick update on where progress is on that? Where's the status?
Carsten Spohr:
After finding fairly quickly a good agreement with the Italian government, we're now waiting for the go ahead from Brussels. We expect this to be done in a timeframe which will allow us to basically close the deal by the end of this year and then ramping up our corporation as early as beginning of '24. I think it's important step for not just ITA and in a way for the Lufthansa Group, but also for the Italian economy to be connected. And also recently it was obvious there's a lack of competition within the Italian market. So I think ITA will add to that in a healthy way. So we now wait for the necessary go aheads and then our team standing by to put this corporation into place.
Karen Walker:
Thank you. And one last question because it's a very important one in this industry of course. Sustainability, of course this is talked about so much in this industry. Just give me a sense of how you feel yourself and the group, what are the key things to focus on for the industry to get to that net-zero goal?
Carsten Spohr:
Because there is so much talk about this, rightly so. I think it's the topic for our industry for the next years. I try to break it up in three boxes. First of all, let's avoid burning fuel by investing into modern aircraft, modern engines, by optimizing the airspace so we can finally fly straight instead of making unnecessary turns, which we believe can easily save 10% of CO2 and fuel in Europe, for example. Second layer is let's use SAF wherever we can instead of fossil fuels. We at Lufthansa are 0.2% right now, which sounds like nothing, but which is twice as much as the rest of the industry in average. So long way to go and the only upscalable fuel will be e-fuels, will not be biofuels beyond a certain limit. So let's get e-fuels in place quickly, scale up like the US is now incentivizing production and usage, which is unfortunately not the way Europe is going. But the US way is the right way, will help us to scale up and create availability of these fuels.
And last but not least, because we won't have enough of one and two for going to net-zero, it's compensation for many years to come. But it's the order I just tried to point out which we are focusing on and let's make sure the industry continues to work on this, making progress as we have done other things. I had the chance yesterday to visit the Smithsonian Air and Space Museum out in Dulles, and even for somebody who has been around for some time, it was once again amazing to see what this industry can do with technology, not with ideology. So let's focus this energy on sustainability and after making flying safe, initially, flying being made available for the masses, now, the third step can be to make flying fully sustainable and that will need all the smart people in these industries as we have solved other issues before.
Karen Walker:
Carsten, thank you. Yes, a very pragmatic list there and excellent. And I will also say that is a beautiful museum as well, isn't it?
Carsten Spohr:
Yes, it is.
Karen Walker:
And as you say, you see all that technology over the history, it does give you a sense of faith in what this industry can continue to do.
Carsten Spohr:
Absolutely.
Karen Walker:
Thank you so much again for your time. It's been great to hear your insights. Thank you also to our producer and of course to our listeners. Make sure you don't miss any of our weekly programmes by signing on at Apple Podcasts or wherever you listen. This is Karen Walker disembarking from Window Seat.
Related Content
